As the Streaming Wars Heat Up, Ryan Murphy Cashes In

Mr. Murphy was in an ideal bargaining position not only because he possesses a fecund imagination able to spin out one successful series after another, but because Apple and Amazon have lately proved themselves willing to spend their way into rivalries with the old-line movie studios and television networks.

Photo

Lady Gaga, left, and Kathy Bates in FX’s “American Horror Story,” one of the hit series that Mr. Murphy has created.Credit
Prashant Gupta/FX

Ted Sarandos, the chief content officer at Netflix, laid down the gauntlet five years ago when he said, “The goal is to become HBO faster than HBO can become us.”

That statement seemed unlikely, coming from an executive who had only recently begun overseeing original programming at a company better known for tucking DVDs into postage-paid red envelopes.

Jump-cut to the present: Netflix is valued at some $115 billion and has 110.6 million subscribers worldwide. It has shown off its might by signing David Letterman to a deal at reportedly $2 million an episode for his new talk show series, giving Chris Rock a reported $40 million for two standup specials and handing Jerry Seinfeld a reported $100 million for his interview program, “Comedians in Cars Drinking Coffee,” and standup shows.

Dana Walden, a co-chief executive of the Fox television group, said Mr. Sarandos’s signing of Ms. Rhimes was the deal that had evinced a deep change in Hollywood.

“What Ted did was extremely disruptive and sent a message to the entire talent community: These old deals that seemed incredibly lucrative at the time, there’s a new template in town,” Ms. Walden said. “For any uber-premium creator, the value has gone up 10 times. And Ryan is a once-in-a-lifetime creator.”

Rick Rosen, the head of TV at the agency WME, said it had become clear that Netflix was now able to outspend the companies that had been around since the early days of the movie business.

Photo

Ted Sarandos, the chief content officer of Netflix, is outspending his more established rivals.Credit
Steve Marcus/Reuters

“As a representative of talent, if you have top-top talent, you must talk to them,” he said. “You’d be negligent if you didn’t. Top talent wants to pitch to Netflix.”

Continue reading the main story

Another competitor in the expanding streaming industry, Hulu — which is available only in the United States — has gained momentum recently with original series like the much-decorated “The Handmaid’s Tale,” and now has 17 million subscribers. While that is no match for Netflix, the company has seen growth in each of the last two quarters.

Apple is the wild card. The company has been buying projects at breakneck speed as it begins to shell out more than $1 billion on original programming. And as Amazon moves into the internationally friendly fantasy genre with “The Lord of the Rings,” it has equipped itself with fresh leadership in the person of the respected NBC executive Jennifer Salke. (Earlier this month, she replaced Roy Price, who resigned as the head of Amazon Studios in October after he was accused of sexual harassment.)

With the old Hollywood model disrupted, or perhaps broken, Disney, Fox, CBS, Viacom and Time Warner have moved to gain scale in their efforts to compete against the deep-pocketed upstarts.

Pending governmental approval, Disney will acquire much of 21st Century Fox in a $52.4 billion deal that the two companies reached in December. CBS and Viacom, which were part of the same corporation from 2000 to 2006, are in talks to reunite. And AT&T is working to purchase Time Warner — a deal that is in jeopardy because of a lawsuit filed by the Justice Department to block it on antitrust grounds.

The mergers and acquisitions taking place in the background are, for now, a destabilizing force in the entertainment industry — one that likely contributed to Mr. Murphy’s decision to leave old Hollywood for the streaming space.

Photo

Amazon Studios recently named Jennifer Salke, who was president of NBC Entertainment, as its new leader.Credit
Frederick M. Brown/Getty Images

“Were the Disney deal to have never happened, I think he would have been close to a new deal with us,” said Ms. Walden, the Fox executive who has worked closely with Mr. Murphy. “If the Disney move happened a year ago, and the transaction was completed by now and we were part of the Disney Company, I think he would be part of us.”

Mr. Murphy declined to comment for this article.

Disney — a part-owner of Hulu that is building new streaming services under its chief executive, Robert A. Iger — has repeatedly cited 21st Century Fox’s ability to create popular programming as one of the main reasons it sought to acquire it from Rupert Murdoch. Disney’s own television studio has not been a reliable supplier.

The day after losing Mr. Murphy to Netflix, John Landgraf, the chief executive of FX, which is part of 21st Century Fox, pointed to his cable network’s long record of producing talent, including Donald Glover (“Atlanta”) and Pamela Adlon (“Better Things”).

Continue reading the main story

“With more than 20 scripted original series on our schedule or upcoming, FX has a very successful track record of identifying and developing talented writers who have produced award-winning hit shows, and it will continue to do so,” he said.

The money aside, Mr. Murphy may have decided that he had a better chance of creating new shows with minimal interference from above at Netflix, rather than at a Disneyfied version of 21st Century Fox. Referring to Disney’s agreement to acquire much of the company at a news media event last month, the producer said: “When this deal first went down, I got a call from the Murdochs and I got a call from Mr. Iger. And I said point-blank, you know, the stuff that I do is not specifically Disney, and I’m interested in that and I’m concerned about that.”

The Murphy deal is a distillation of what may prove to be a once-in-a-generation Hollywood moment. He was looking for security at a time when the old-line companies had yet to take the expanded form they are likely to assume in the next year — and when the streaming services are spending in manic style.

And it helps that Mr. Murphy has become a Netflix obsessive in his own right.

“All Ryan has watched for the last year has been Netflix,” said Ms. Walden, who is the godmother to Mr. Murphy’s children. “He loves their Y.A. series, he loves their documentaries, he watched ‘The OA’ and loved it, he loved ‘13 Reasons Why,’ he admires the brand, the programming. It was the right timing and right company for him.”

The question now is: How long will the streaming companies continue to spend in a George Streinbrenner-like fashion for talent? Last month, Netflix told investors that it had generated a net income of more than $559 million in 2017, but said its free cash flow was negative $2 billion — a figure that could balloon to $4 billion this year, the company said.